Eating out Might Soon Become Cheaper With the GST Council Slashing Tax Rates

Following multiple complaints of customers being robbed by restaurants through input tax credit, which is actually paid by suppliers, a specially constituted group of state finance ministers has proposed the change in tax rate.

For those who love eating out, things are soon going to get better with GST Council considering a reduction in the taxes levied on restaurants.

According to The Times of India, the council is likely to motion for the levy on restaurants to be reduced from 18% to 12% and the input tax credit facility available in eateries to be struck off.

Following multiple complaints of customers being robbed by restaurants through input tax credit, which is actually paid by suppliers, a specially constituted group of state finance ministers has proposed the change in tax rate. “It is one segment that was not passing on the benefits to consumers,” a senior officer told TOI.

If the proposed change gets the nod, restaurants will fall under two slabs—5% for those with a turnover of up to ₹1 crore and have opted for the composition scheme* and 12% for the rest.

However, there remains no clarity on the tax rate being levied at restaurants in five-star hotels.

Except for those under the composition scheme, where the compliance burden is lower, the current tax rate levied on air-conditioned restaurants is 18%, while that on non-AC joints is 12%. “The idea is to have only two slabs but the final decision will be taken by the GST Council,” said another official.

Reportedly, at the time when the rates were being finalised, the GST Council believed that the actual levy for most restaurants will remain largely unchanged for they had service tax and VAT levied earlier.

Also, the input tax credit was incorporated to make it more convenient for consumers but following multiple grievances of restaurants being unfair, the government is now reconsidering the structure. According to the council, the withdrawal of input tax credit will make it a flatter tax structure, with many of the opinion that the move will result in the end of GST on restaurants in its purest form.

It is believed that the new tax structure is slated for discussion amidst other proposals during next month’s meeting of the GST Council in Guwahati.

*Composition Scheme is a simple and easy scheme under GST for taxpayers. Small taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of turnover. This scheme can be opted by any taxpayer whose turnover is less than ₹1 crore.

Shuttling between existentialist views and Grey's Anatomy, Lekshmi has an insanely disturbing habit of binge reading. An ardent lover of animals and plants, she also specializes in cracking terribly sad jokes.